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Pa.’s top pension earners take home hundreds of thousands a year

Philly.com

Nov. 25--Three years after retiring as president of Pennsylvania State University, Rodney Erickson is netting $477,590 a year -- from a state pension.

Gary Schultz, the former Penn State vice president who pleaded guilty in the Jerry Sandusky scandal, takes home $330,699 in pension benefits. Former state lawmaker Frank Oliver, a Democrat who represented North Philadelphia, gets $286,117.

More than 127,000 former Pennsylvania state employees or their beneficiaries collect public pension checks each month, and most are comparatively paltry. The average paid out last year was $27,722.

But despite reforms in the system -- which mostly affect future retirees -- and a move by some states to cap retirement payments, a separate class of Keystone State pensioners will continue to receive checks that alone put them among the top tier of all income earners in the United States.

As the costs of public pensions continue to be a point of debate for struggling state and municipal governments, the Inquirer and Daily News reviewed data for hundreds of Pennsylvania's highest-paid beneficiaries, all current through August.

They showed that 20 state retirees collect more than $215,000 a year -- a payout so big it exceeds an IRS mandated pension cap and must be paid from two plans. More than 500 retirees collect $100,000 or more.

Officials in the system say such retirees earned their benefits -- contributing a percentage of their pay to the state's defined-benefit plan, along with their employers. Critics say the six-figure payouts reflect a policy that isn't grounded in fiscal reality.

"Professional state employees should make a good living, but they are not entitled to make a killing," said Eric Epstein, coordinator with the Rock the Capital reform group in Harrisburg and an advocate for pension changes. Some of the payouts, he said, "are excessive pockets of gluttony that are deeply disturbing" as Pennsylvania confronts a $70 billion shortfall in its retirement obligations.

Many of the best-paid retirees worked in the court system, the legislature, or academia, the records show. Of the top 500, 124 worked at Penn State, and 143 at schools within the State System of Higher Education.

The pensions traditionally are calculated using a formula that includes an employee's highest average salary over a three-year span and years of service.

The $477,590 going to Erickson, 71, flowed in part from his 37 years at Penn State and his final salary of $633,336. He also received severance, bonus, and life insurance payouts upon retirement.

Right behind him on the State Employees' Retirement System (SERS) list is Stephen Benkovic, 79, a former Penn State chemistry chair and National Medal of Honor recipient who receives $443,879. Efforts to reach him and Erickson this week were unsuccessful.

Retired Shippensburg University human communication studies professor William Kingsley, who at third on the list gets $385,819, retired in 2015 after nearly 50 years with the university. Kingsley said pension considerations played no role in his decision to work for the university.

"I wanted to do theater, I had opportunity there, and that's what I did," said Kingsley, 85, who lives in Aspers, Adams County. "I also loved teaching."

Asked whether his pension allowed him to live comfortably, he said: "Reasonably."

Schultz, 68, the former Penn State vice president, spent nearly four decades working for the university. His guilty plea to child endangerment for not reporting signs that Jerry Sandusky was a serial child-sex predator doesn't affect his $330,000 pension. (Sandusky himself won a court battle to keep his $59,000-a-year retirement benefit even as he serves at least three decades in prison.)

In the state's Public School Employees' Retirement System -- which covers workers in the 499 school districts -- just one pension tops $222,000. The second highest is $190,000.

Given that relatively few retirees receive them, the largest pensions aren't a significant driver of Pennsylvania's pension deficit, said Greg Mennis, director of the Public Sector Retirement Systems project at Pew Charitable Trusts.

What "really set Pennsylvania apart," Mennis said, was how significantly the state increased benefits in 2001, when the pension system was flush. Since then, its $20 billion pension surplus has turned into a nearly $70 billion deficit.

Pennsylvania has since rolled back those benefit increases for new employees. The state also has stuck to a plan to increase employer contributions into the system. And earlier this year, lawmakers and Gov. Wolf agreed on a plan to cut pension costs by shifting at least some benefits for future employees into 401(k)-style plans.

But past decisions to boost benefits continue to have an effect. One was lawmakers' decision in 2002 to create a separate plan for paying out SERS members whose pensions under the enhanced state formula would have exceeded the IRS cap.

Such plans are relatively common, said Rick Dreyfuss, a business consultant and senior fellow with the conservative Commonwealth Foundation.

The real issue, he said, are the salaries that lead to the largest pensions. "If you don't manage the base pay, then the whole thing is going to continue," Dreyfuss said.

Leonard S. Jefferson, a former Penn State College of Medicine cellular and molecular physiology professor, gets a $30,999 monthly check, which is among the top 20. He said his work as a researcher starting in 1967 was a boon for the university, bringing millions of dollars in funding for students and staff over decades.

"This extramural funding has also provided employment for numerous research support staff, and supported the training of more than 100 graduate students and fellows. All of which has contributed significantly to the economy of the Commonwealth," Jefferson said in an email.

Such retirement obligations ultimately are at least partly borne by taxpayers. Penn State receives state funding every year, as does the higher education system, and pension costs "are a very, very significant part of our annual budget," said Kenn Marshall, spokesman for the system of 14 universities. The state appropriation covers about one-fourth of the system's operating budget, Marshall said.

About half of the university system's 12,500 full-time employees, including more than half of faculty, choose a 401(k)-like defined contribution plan instead of the traditional SERS pension, Marshall said. The employer match for that plan is 9.29 percent.

In 21 states, a defined contribution plan -- the traditional kind of pension -- is the only retirement plan option offered to most faculty, according to Pew.

Some states have moved to cap pensions. In New Jersey, where the highest pension tops out at $195,000, pension-eligible salaries for newer members in the state's main plans are capped at the annual maximum wage for Social Security deductions, which this year is $127,200.

Some lawmakers said Pennsylvania had effectively capped pensions with the move to a hybrid defined benefit/defined contribution plan for future hires. That takes effect in 2019.

"The Commonwealth will no longer be on the hook for those exorbitant amounts," said state Rep. Mike Tobash (R., Schuykill).

But today's retirees are still owed pensions based on past rules. "Whether you like this pension reform or not, it's going to take years for this to emerge in terms of something meaningful," Dreyfuss said.